Benchmark 10-year Treasury yields rose 11 basis points overnight and a further one bp in early Asia trade to 4.19%. Gold hit a record high just above US$2,740 an ounce on Monday and traded at US$2,725 early on Tuesday.
Japan’s Nikkei slid 1.1% in morning trade to hit its lowest since early October. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.8%.
Wall Street gauges edged down overnight and futures inched lower in Asia. A sharp rebound in oil prices – which can flow through to inflation – probably helped unsettle bond markets, said ANZ strategist Jack Chambers, along with the US election, now only two weeks away, coming in to view.
“A secondary consideration could be a bit more focus on the US election and fiscal dynamics,” he said. “Regardless of who wins, you can’t really see a path to fiscal consolidation.”
Brent crude futures had climbed 1.7% on Monday, with no letup in Middle East fighting following the death of Hamas leader Yahya Sinwar. Prices steadied at US$73.89 a barrel in Asia.
In Australia, the benchmark S&P/ASX 200 was down more than 1.3% mid-morning. Shares in independent grocer Metcash slid 6% after a Goldman Sachs note cut the stock price target and said the company risks losing market share.
China’s markets were pinned well below recent highs while traders wait for more details and especially more government urgency and spending to support the ailing economy.
Hong Kong’s Hang Seng was flat, as was the Shanghai Composite.
Foreign exchange markets mostly tracked the move in Treasuries, which sent the dollar higher. The euro traded at US$1.0819, within a whisker of its lowest since early August.
The yen sat by a two-and-a-half-month low at 150.67 per dollar, while the Australian and New Zealand dollars were also pinned near multi-month lows at US$0.6655 and US$0.6021 respectively.
Analysts say the dollar’s recent rally reflects markets pricing a Donald Trump victory in the US presidential race and a stronger currency as his trade, tax and immigration policies will likely lead to higher inflation and higher yields.
“With a victory for president Trump now priced into currency markets, AUD/USD has modest rather than large downside risk from when the election results start to be released,” said Commonwealth Bank of Australia strategist Joe Capurso in a note.
“With vice-president Harris now the underdog, the market reaction to her victory would likely be larger than a victory by president Trump.”
A relatively bare data calendar puts extra focus on US earnings for insight into the economy and markets’ mood.
General Motors, Texas Instruments Verizon, Lockheed Martin and 3M are among those reporting on Tuesday.